Middle-class kingdom: Made in Japan is now big in China

Makers of household goods seize moment amid a thaw between Asia’s biggest economies

OSAKA, JAPAN—Makers of consumer goods, basking in a warm spell between Asia’s two biggest economies, have discovered that the factories in this country have an advantage China can’t match. They can put “made in Japan” on the label.

That is why Wang Lin, executive director of Shanghai ShenXing Brush-making Co., decided to open a factory in Osaka to make toothbrushes to sell in his home country. “Because living standards are rising in China, consumers are looking for good stuff,” Mr. Wang said. “Chinese people have a good impression about Japanese products.”

Manufacturers in industries that had long been fleeing Japan say the country looks attractive again thanks to demand from consumers in China and other Asian markets, a sign of how the rise of the middle class is reshaping the region.

Tokyo-based cosmetics maker Shiseido Co. is building new factories in its home country for the first time since 1983. After cutting back due to falling sales at home—the company went down to three Japanese factories in 2015 from six in 2004—it is ramping up output again to feed strong demand in China and elsewhere and a recovery in sales in Japan.

Shiseido Chief Executive Masahiko Uotani said Chinese tourists in Japan were snapping up cosmetics and his company needed to reach Chinese who wanted the same Japanese-made creams and lotions at home. “We have to boost production even more to really grab this opportunity,” he said.

The two new factories are set to open over the next two years; Shiseido’s sales last year rose 20% in China and 18% globally, to ¥1.005 trillion ($9.05 billion), according to the company.

Japanese companies have long exported high-tech equipment and parts to China that China couldn’t make on its own. Chinese companies then used that equipment, plus low-cost labor, to turn out consumer goods such as clothing and inexpensive electronics for export.

China’s growing affluence is upending that decades-old pattern by creating a market for pricier consumer products from Japan.

“Many Japanese designs cater to Asians,” said Zhu Aiqin, a 32-year-old teacher in Beijing, whose home is filled with Japanese goods, including a refrigerator from Panasonic Corp. and an air conditioner from Daikin Industries Ltd.

“All these Japanese home appliances are well made, with good quality and still working after years,” said Ms. Zhu, who is also a fan of Shiseido cosmetics and uses Goon diapers sold by Daio Paper Co. of Japan for her infant daughter.

Political winds have been blowing in favor of closer China-Japan economic ties as the U.S. and China pursue a trade fight with punitive tariffs by both sides. Japanese Prime Minister Shinzo Abe is expected to visit China in October, according to a member of his delegation, and said in May that he hoped Chinese President Xi Jinping would soon pay his first visit to Japan. Japan is also taking a greater role in promoting the Regional Comprehensive Economic Partnership, a proposed trade deal that includes China.

History shows that political tensions can erupt quickly, inflamed by memories of the 1930s and 1940s when Japan occupied much of China. In 2012, antiJapan demonstrations broke out in China over a territorial dispute in the East China Sea. Shops selling Japanese brands in China were forced to close temporarily and tourism to Japan dropped sharply.

“In countries like China and South Korea, it is difficult to think of political and economic relationships separately,” said Shinichiro Kobayashi, an economist at Mitsubishi UFJ Research and Consulting. If political tensions revive, he said, “Chinese consumers may try to show their patriotism by boycotting Japanese goods even if they are becoming part of their daily necessities.”

For now, those consumers would rather show off their sophistication with a Japanese label. Many are doing so by visiting Japan. In 2017, about half of Japan’s nearly 29 million foreign tourists came from China, Hong Kong and Taiwan, and those areas accounted for nearly 60% of the $40 billion in total spending by tourists, according to government data.

Casio Computer Co., known for its G-Shock watch series, recently boosted production of a $20 watch at a factory in northern Japan. Until now, it mostly made that model in China and Thailand.

Tetsuya Kawai, who is in charge of Casio’s watch business, said all the factories have the same quality, but buyers abroad “have a perception that made-in-Japan goods are more substantial.”

More Chinese executives are realizing that a company doesn’t need to be Japanese to put the coveted words on their packages. The number of China-based manufacturers with units in Japan, including Hong Kong companies, rose to 49 as of March 2017, according to Japanese government data, double the number five years earlier.

Shanghai ShenXing Brushmaking makes inexpensive brushes in China as a contractor for other brands. But Mr. Wang, the executive director, thought it could sell a higher-end product to Chinese consumers and came up with the idea for a Japanese factory a few years ago.

“My business friends didn’t understand my idea at first and called me crazy” because of the higher costs in Japan, he said. “But if we come to Japan and make products here, they become authentically Japanese.”

Mr. Wang decided to make a toothbrush as his first original brand, and spent five years developing the product with Japanese designers.

The company now exports most of the 50,000 toothbrushes it produces each month to China, where consumers can buy them for about $5 apiece on the online shopping mall JD.com.

The One-Third model comes with a replaceable brush head and black bristles that use bamboo charcoal, an antibacterial ingredient often used by Japanese makers.

The package sold in China has Japanese writing and a sticker placed on the back with a Chinese translation, to reinforce the impression that China is just a sideline for a product mainly used by Japanese people.

In fact, Mr. Wang said he wasn’t interested in becoming popular in Japan. Still, the product is available at some drugstores in Osaka and on Japanese e-commerce sites like Yahoo Shopping.

“I thought it would look strange if the product we call ‘made-in-Japan’ isn’t sold in Japan,” he said.